HDFC Bank faces class-action lawsuits from two US-based law firms — calls them 'frivolous'

HDFC Bank faces class-action lawsuits from two US-based law firms — calls them 'frivolous'
US law firms get ready to file lawsuits against HDFC Bank for causing loss to shareholdersBCCL
  • Two US-based law firms are looking to file class-action securities claims against HDFC Bank for sharing materially misleading information to shareholders.
  • Delay in sharing loan numbers with the Reserve Bank of India (RBI), scandal in vehicle loans and net profit missing market estimates are the primary factors highlighted.
  • If enough shareholders sign up, these law firms will officially be able to file their lawsuits.
HDFC Bank has been accused of issuing ‘materially misleading business information’ to its investors by two US-based law firms, Schall Law Firm and Rosen Law Firm. They are looking to file a securities class action against the bank on behalf of its shareholders.

The firms outline a repeated pattern by the Indian bank of not disclosing important information to shareholders. Three instances in particular — probe into loans practices in vehicle financing, delay in providing loan details to the RBI, and lower net profits — have been called into question.

"We were unaware of any such development (class action lawsuit) till we heard about it from the media a little earlier today. We are getting details of it. We’ll examine it and respond to it as appropriate. Prima facie it does look frivolous as we believe we have been transparent in our disclosures," HDFC Bank told Business Insider India.

HDFC Bank — Transparency concerns mount
As per the law firms, HDFC Bank failed to disclose the probe into allegations of improper lending practices and conflicts of interest involving the unit’s former head, which was first reported by Bloomberg on July 13.

“On this news, HDFC Bank’s depositary receipt price fell $1.37 per share, or 2.83%, to close at $47.02 per share.” said Rosen Law Firm.

Later that month, when the bank reported its first-quarter earnings, it missed market estimates for net profit as per both law firms.

HDFC Bank’s transparency was again brought into question in August when it was reported that the bank was late in providing details of loans and the repayment status of its borrows to the Reserve Bank of India (RBI) — something that has been an issue for nearly two years.

Both, Rosen Law Firm and Schall Law Firm, are seeking more information from HDFC Bank shareholders who are looking to recuperate their losses. If enough shareholders step up to claim their losses, the law firms will be able to file a class-action lawsuit against the bank.

This comes at a time when CEO and MD Aditya Puri, who built the bank from scratch and has been at the helm for 26 years, is gearing up for retirement. Sashidhar Jadishan, who has been with the bank since 1996, is set to replace him as the new CEO on October 27.

HDFC Bank just finished raising ₹15,000 crore through qualified institutional placement (QIP) on Saturday. Investors were allocated ₹41.89 crore shares at ₹358 per share. The bank is cushioning its balance sheets along with other Indian banks before the RBI’s moratorium on loan repayments comes to an end on August 31.

HDFC Bank's Aditya Puri believes Sashidhar Jagdishan is the 'worthiest person' to succeed him